Primary Wave is in advanced talks to acquire Kobalt Music Group.
MBW understands that Larry Mestel-led Primary Wave is among a number of potential suitors who have been in discussions with Kobalt’s majority owner, private equity firm Francisco Partners (FP), in recent months.
The latest intel is that Primary Wave now stands alone as a would-be buyer trying to agree on a sale price with Francisco.
For FP, a sale of Kobalt at this stage would be surprisingly early compared to a more typical private equity time horizon of holding an asset for 5-7 years before cashing out.
FP closed a deal to buy a majority stake in Kobalt in September 2022, which valued the acquired company at USD $750 million.
Billboard reports that a potential Primary Wave buyout could now value Kobalt at north of $1.5 billion – literally double the valuation the same company achieved less than four years ago. (Factored into that $1.5 billion estimate: A Morgan Stanley-powered rights acquisition vehicle that Kobalt launched in 2023.)
MBW sources close to the talks suggest that FP is in no hurry to offload Kobalt, whose commercial performance has continued to improve post-FP’s acquisition under the strong leadership of CEO, Laurent Hubert.
Primary Wave, however, has access to significant resources, and may potentially be willing to pay a premium for Kobalt if it means FP relinquishing its stake earlier than expected.
MBW has obtained a telling internal memo to staff sent yesterday (February 26) by Kobalt’s Hubert after news of the potential PW deal broke.
“Let me be clear: our intention is for Kobalt to remain an independently run company, singularly focused on delivering exceptional service for our clients globally.”
Laurent Hubert, Kobalt Music Group, in a memo to staff obtained by MBW
Wrote Hubert: “As one of the most successful independent music companies in the world, it is no surprise that there is ongoing market interest in our business. We have consistently attracted attention, particularly in recent years, reflecting the strength of our platform, our performance, and the value we create for our clients.
“Let me be clear: our intention is for Kobalt to remain an independently run company, singularly focused on delivering exceptional service for our clients globally.”
With Primary Wave valued in the region of $6 billion, the combination of it plus Kobalt could create a $7 billion-plus consolidated powerhouse in music.
It would also give Primary Wave ownership of Kobalt’s admin-based strength in frontline music publishing, in addition to the firm’s sister platform, the digital CMO, AMRA.
Kobalt says that it serves over 1 million songs across 10 global offices. It represents songwriters including Roddy Ricch, Max Martin, Karol G, Andrew Watt, Stevie Nicks, Phoebe Bridgers, The Lumineers, The Foo Fighters, and Paul McCartney, among many others.
Larry Mestel’s Primary Wave has built a formidable portfolio of iconic catalog stakes over the past decade, spanning rights in the music of Prince, Whitney Houston, Bob Marley, Stevie Nicks, James Brown, Notorious B.I.G. and, most recently, Britney Spears.
Primary Wave, founded by Mestel in 2006, saw its buying power supercharged in 2022 by a $2 billion partnership with Brookfield Asset Management to fund music rights acquisitions.
Kobalt, for its part, has been under the ownership of US private equity firm Francisco Partners since 2022, when it acquired the company in a deal valued at approximately $750 million.
That deal followed Sony Music‘s $430 million acquisition of AWAL and Kobalt Neighbouring Rights in 2021, bringing Kobalt Music Group’s total exit value to approximately $1.2 billion.
Goldman Sachs, which also advised Kobalt on the 2022 Francisco Partners deal, is reportedly advising on the Primary Wave transaction.
Prior to the Francisco Partners takeover, Kobalt had sold off significant portions of its catalog, including a $322.9 million portfolio sale to Hipgnosis Songs Fund in 2020.
Francisco Partners retains a 90% controlling stake, with Kobalt founder Willard Ahdritz, Dundee Partners, and Matt Pincus (who sold SONGS Music Publishing to Kobalt Capital in 2017) also holding equity.
The SONGS copyrights were subsequently included in Kobalt Capital’s Fund II portfolio, which was sold to Chord Music Partners for $1.1 billion in 2021.
(Chord was founded in 2021 by KKR and Dundee Partners. Universal Music Group later acquired a 25.8% stake in Chord in 2024 via a $240 million investment. That deal, which saw Chord valued at $1.85 billion, resulted in KKR exiting its position in the company. Chord raised over $2 billion in investable capital last year).
An acquisition of Kobalt would address a long-standing gap in Primary Wave’s operations: the lack of its own publishing administration infrastructure.
Billboard noted that Primary Wave has historically relied on third-party administrators for royalty collections, and has more recently been routing assets to Universal Music Publishing Group where existing admin deals have expired and songwriters have agreed.
Taking ownership of Kobalt’s platform would change that dynamic entirely – and would also hand Primary Wave control of AMRA, Kobalt’s digital royalty collection operation.
AMRA’s model of collecting directly from streaming services, rather than routing payments through local societies and sub-publishers, could deliver meaningful margin improvements across Primary Wave’s catalog.
The deal would also give Primary Wave exposure to the catalog assets Kobalt has been acquiring since its change of ownership. In 2023, Kobalt launched a joint venture with Morgan Stanley’s Tactical Value division, armed with over $700 million to deploy into music rights. The venture has been focused primarily on publishing catalogs, as well as some master recording rights, reportedly including rights tied to *NSYNC and AJR.
Kobalt has also bolstered its financial capacity through new credit facilities and asset-backed securitization.
Another asset Primary Wave would inherit is KOSIGN, Kobalt’s recently-launched publishing administration service aimed at independent artists and songwriters who lack the infrastructure to collect their own publishing royalties. It’s a growing segment of the market, with competitors including Songtrust and Word Collections vying for share.
Kobalt’s most recent accounts, filed at the UK’s Companies House for Kobalt Music Group Intermediate Limited for the year ending June 30, 2024, show revenue of $794.4 million, up from $522 million in the prior period (see below).
Gross profit rose to $141.5 million from $93.1 million, while adjusted EBITDA climbed to $75.3 million from $47.4 million.
Billboard’s sources suggested that Kobalt is now generating roughly $100 million in EBITDA, and that under US accounting standards, the company’s operating performance is significantly stronger than the UK filing suggests.
Kobalt’s next set of financials – for the year ending June 30, 2025 – are due at Companies House by March 31, 2026.
Primary Wave’s potential acquisition of Kobalt isn’t the only independent mega-deal reportedly in the works in the wider global music business.
Last month, BMG Rights Management was reported to be in discussions to acquire Concord, in a deal that would bring together two of the world’s biggest independent music companies.
Bloomberg broke the news on January 29, reporting that the potential transaction could be worth up to $7 billion. Billboard separately reported that the company could sell for more than $6.6 billion, citing its own sources close to the negotiations.
BMG is a division of German media giant Bertelsmann.
Music Business Worldwide